Sunday, November 19, 2017

Behavioral biases come in all shapes and forms. Many of these, however, relate to the issue of imperfect information (e.g. asymmetric information, instances of costly information gathering and processing that can distort decision-making, incomplete information, etc).

A recent Quartz article on the balance of threats/risks arising from the 'fake news' phenomenon (the distortion of facts presented, sometimes, by alternative and mainstream media alike) and another informational asymmetry, namely selectivity biases (which apply to our propensity to select information either due to its proximity to us - e.g. referencing bias, or due to its ideological value to us - e.g. confirmation bias, etc). Note: Quartz article is available here: https://qz.com/1130094/todays-biggest-threat-to-democracy-isnt-fake-news-its-selective-facts/.

According to the article: "News sources aim to cover—in the words of the editor in chief of Reuters—the “facts [we] need to make good decisions.”" But, "As readers, we also suffer from what’s called confirmation bias: We tend to seek out news organizations and social media posts that confirm our views. Selective facts occur precisely for this reason." In other words, confirmation bias is a part of our use and understanding of information. The author concludes that "Selective facts are worse than outright fake news because they’re pervasive and harder to question than clearly false statements."

So far so good. except for one thing. The article does not go in detail into why selective facts are, all of a sudden, prevalent in today's world. Why does confirmation bias (and, unmentioned by the author, proximity heuristic) matter today more than they mattered yesterday?

The answer to this, at least in part, has to be the continued polarization of the mainstream media (and, following it, non-traditional media).

Not enough to drive home the point? Ok, here is from Forbes article covering the topic (source: https://www.forbes.com/sites/brettedkins/2017/06/27/u-s-media-among-most-polarized-in-the-world-study-finds/#1ee9a3242546):
"The Reuters Institute recently released its 2017 Digital News Report, analyzing surveys from 70,000 people across 36 countries and providing a comprehensive comparative analysis of modern news consumption. The report reveals several important media trends, including rising polarization in the United States. While 51% of left-leaning Americans trust the news, only 20% of conservatives say the same. Right-leaning Americans are far more likely to say they avoid the news because “I can’t rely on news to be true.""

The trend is not new. In the 1990s, plenty of research have shown that print and cable media have started drifting (polarizing) away from the 'centre-focused' news reporting as local monopolies of newspapers and TV stations started to experience challenges from competitors. You can read about this here:

Tuning Out or Tuning Elsewhere? Partisanship, Polarization, and Media Migration from 1998 to 2006 by Barry A. Hollander (2008), Journalism & Mass Communication Quarterly, Volume 85, Issue 1, which posits a view that polarization of the mass media has been driving moderate voters away from news and toward entertainment. Which, of course, effectively hollows out the 'centre' of media ideological spectrum.

"This article examines if the emergence of more partisan media has contributed to political polarization and led Americans to support more partisan policies and candidates," according to "Media and Political Polarization" published in Annual Review of Political Science Vol. 16:101-127 (May 2013) by Markus Prior.

And economics of media polarization in "Political polarization and the electoral effects of media bias" by Dan Bernhardt, Stefan Krasa, and Mattias Polborn, published in Journal of Public Economics, Volume 92, Issues 5–6, June 2008, Pages 1092-1104

These are just three examples, but there are plenty more (hundreds, in fact) of research papers looking into twin, causally interlinked, effects of media polarization and the rise of the polarized voter preferences.

Which brings us to the Quartz's observation: "While social media and partisan news has allowed more voices to be heard, it also means we are now surrounded by more people manipulating what facts make it to our newsfeeds. We’d draw a different conclusion—or even just a more nuanced picture—if we were given all the information on an issue, not just the parts that best benefit a particular viewpoint."

It may be true, indeed, that current markets for supply of alt-news are enabling greater confirmation bias prevalence in voter attitudes. But it is at best just a fraction of the complete diagnosis. In fact, the polarized, or put differently - biased, nature of the mainstream news is at least as responsible for the evolution of these biases, as it is responsible for the growth in alt-news. That is correct: fake information is finding are more accepting audiences today, in part, because the CNN and FoxNews have decided to cultivate ideologically polarized market differentiation for their platforms in the past.

Disclaimer

This blog represents my personal views and is not reflective of the views or opinions held by any company, contractor, client or employer I work for currently or have worked for in the past. These views are not an endorsement to take any action in the markets or of any political position, figures or parties.

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